Hartford Life is expanding its 401(k) operation by going after the small-business market, which has been largely ignored by many that offer the retirement savings plans.

"Generally we’re responding to an acute need in the small-case market," said Bruce Ferris, a vice president, director of sales and marketing at Hartford Life. "Competitors have abandoned the market, to our advantage."

But there is a reason for those competitors to avoid the small-case market, said Geoffrey Bobroff, president of Bobroff Consulting Inc. in East Greenwich, R.I.

"Record keeping is expensive, and the risk of spending a lot of money to build up a plan, only to have the company switch to a new provider is quite high," Mr. Bobroff said. "There is no loyalty in the business, so why spend the energy on it? Why build up the business just to have to compete for it?"

However, he added, the large-case marketplace is jam-packed, and there isn’t much room left for growth in midsize plans either, so Hartford Life has gone to the best remaining place to push the product.

"Most companies of over 5,000 employees already have a plan, and 70% of the mid-market, which is defined as companies with 1,000 to 5,000 employees, have plans as well," Mr. Bobroff said. "But there aren’t a lot of plans for the smaller guys."

So far, the small-case strategy has worked for Hartford Life. It has expanded its 401(k) business each year, including 55% growth in 2001, when sales totaled $850 million, according to Mr. Ferris. This has been the strategy of the Simsbury, Conn.-based unit of Hartford Financial Services Inc. since it entered the 401(k) business in 1996.

Mr. Ferris admits the danger of losing a small-case 401(k) client once a plan has been established.

"We’re confident that if we offer the best service, wholesaling, and the best products, we have the ingredients for success," he said, however. He added that many Hartford Life 401(k) clients have other product relationships with the company.

Added E. Thomas Foster, Hartford Life’s national spokesman for the qualified retirement plan market, "we have a 96% retention rate, and it’s because of our service and because of our flexibility. For instance, on one of our 401(k) plan platforms, we do not have a proprietary fund requirement. With many providers, a certain percentage of the investments have to go into the proprietary fund. That’s a selling point for us."

Robert Donohue, a vice president and senior analyst at Moody’s Investors Service in New York, said Hartford Life’s 401(k) business fits well with its group life business.

"It dovetails right into it," Mr. Donohue said. "They’re best known for their variable annuities, but they’re doing much more than that. They have very good growth in mutual funds; they are well positioned in group life; they’ve recently moved into college savings; and they’re growing quickly the 401(k) business."

Hartford Life began offering mutual funds in 1996 and selling them through banks. Its launching of a 529 college savings plan, sometimes known as the 401(k) savings plan for college, occurred last month. This product, too, is being made available through banks, and Mr. Ferris estimated that about 50 banks nationwide sell Hartford Life’s 529 plan.

Mr. Ferris said banks are also a big part of the company’s distribution of 401(k) plans, though it does not break out sales by channel.

"How many small-business customers do banks have?" Mr. Ferris said. "They have many. We also already have very good relationships with banks, so those are two reasons why banks are a large and growing channel for us in 401(k) plans."

Mr. Foster added that Hartford Life has 40 retirement specialists available nationwide who work with banks.

"The bank rep doesn’t have to worry about the differences in all the plans," he said, "they just have to find the small-business owners. Our retirement specialists do the rest."

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